BUSINESS ORGANIZATIONS

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Transcript of BUSINESS ORGANIZATIONS

BUSINESS ORGANIZATIONSSole Proprietorship Make up @ 70% of businesses in the USMake up 5% of all sales in the USSection 1—Basic Forms of OrganizationsOwned/Operated by a single personSole ProprietorshipTwo or more people enter into business for mutual gainPartnershipsADVANTAGESPartnershipsFirm (Business) legally recognized as having a existence as an entity separate and distinct from its owners.CorporationsCORPORATIONSHardest to find good employeesHardest to raise capitalUnlimited LiabilityDISADVANTAGESEasy to get out Easier taxesKeep profits yourselfEasiest to manage (your own boss)Easy and inexpensiveADVANTAGESCorporationMake up @20% of businesses in the USMake up 87% of all sales in the USPartnershipMake up @ 8% of businesses in the USMake up 8% of all sales in the USSilent partners INVEST in a company they think will be successful. They provide capital but seek no management role. They only want a share of the profit.Limited-Each person assumes different amounts of liability, investment, profit, etc.General-Each person shares equallyPartners can be general, limited, or silentJoint and Individual LiabilityShared ProfitsPotential Conflict with partnersDISADVANTAGESComplimentary skillsEasier to raise capital/employees than S.P.No separate taxesEasy to start--Probably need a contract2--Selling the stock that you own.To make money, you must sell at a higher price than what you purchased for. You no longer own that portion of the corporationDividends can be paid in three ways. Cash, Stock, or PropertyDividends are a fixed % that you know going in to the purchase1--Dividends--% of the profit share based on the % of the Corp. you own (# of shares)Owners (stockholders) can make money in two ways:Corporations are owned by their stockholders (shareholders) who share in profits and losses generated through the firm's operationsPublic Corporations - Ownership shares known as "stock" are offered for sale to the general public. Private Corporations - Corporations that do not offer ownership shares for purchase by the general public but may offer them to employees.MergersSECTION 2—Business GrowthOne way that businesses attempt to grow is through mergers, because they:MERGERSVertical mergers are where one company buys others that help to lower the cost or increase the efficiency of productionMERGERSVERTICAL OR HORIZONTAL?When one company buys other companies that are unrelated to their core business in an attempt to diversify.CONGLOMERATESA multinational corporation is a very large firm with a headquarters in one country and several branches operating overseas.MultinationalsAdvantages of Multinationals MULTINATIONALSMultinationalsConglomeratesCan change its imageCan deliver a better productCan eliminate a rivalCan be more efficientCan grow fastHorizontal mergers are where one company buys a direct competitorBy having component businesses each making unrelated products, the overall sales and profits will be protected. Diversification is one of the main reasons for conglomerate mergers. Corporations may become conglomerates after becoming very large through mergers and acquisitions of a variety of businesses.May exploit the people of the host nationThey may influence the political life of a host nationProfits are returned to the overseas head office.May take away jobs at homeDisadvantages of MultinationalsProduce tax revenues for the host countryNew or better goods for host country.Introduces new production techniques.Creates jobs for the host country.Preferred Stock

(rare)Common Stock

There are two different types of stock offered for sale:S I D E T R I PYou may be hearing more and more aboutanother type of business model...THE LLCLLC stands for Limited Liability CompanyLLC's are a great option for small businesses thatwant limited liabilityLLC's mix the liability aspect of corporations with the flexibility and tax benefits of partnerships and sole proprietorshipsBONUS LEARNING (FREE OF CHARGE!!!)ALL MERGERS ARE SUBJECT TO REVIEW BYTHE GOVERNMENT IN ORDER TO MAINTAINCOMPETITION!Vertical or Horizontal?Vertical or Horizontal?ADVANTAGESCorporationsPotential leveraged buyoutdouble taxationSubject to government regulationsCost of incorporatingDISADVANTAGESUnlimited LifeLimited Liability (Separate Entity)Easiest to find good employeesEasiest to raise capital (sell stocks/bonds)http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.htmlAnyone can buy shares The more shares owned, the more control of the corporation you haveLET ME GET 50 SHARES! and a portion of the dividend (a percentage of profits)Holders entitled to a voting share in the company (1 vote per share)holders are paid a dividend before common stock holders.Limited stock issues that have no voting share. HEY CHIK FIL ASole ProprietorshipSimplist and most common form of business

Unincorporated and run by a single personLegally no difference between the owner and the businessLimited Life